Tennessee VA Home Loans:

Eligibility, Getting Started and FAQs

It’s our job at 1st United Mortgage, to help families buy a home. It’s our honor to help veterans, active military members, & their families with this as they fulfill the American Dream of home ownership.

That process is easier for qualified applicants thanks to the VA Home Loan Program. Today it’s even possible to purchase a home at low interest rates without a down payment. We can even help those with low credit scores. Our experienced staff members are well-trained to guide clients through eligibility, document requirements, and happy to answer questions about Tennessee’s state specific benefits. At 1st United Mortgage, we work hard to keep your mortgage process simple and as stress-free as possible.

Many clients are pleasantly surprised to to hear that a 620 credit score is not required for VA loan approval. In fact, we can approve loans with credit scores starting at 560 and higher. Plus, we have a credit score rehabilitation program that can help you get there if you do not yet qualify.

VA Mortgage Options in Tennessee

Tennessee includes some of the hottest real estate markets in the country. The job opportunities and continued growth, plus the state’s location to military bases make Tennessee a popular place for veterans and active duty members to purchase a home with a VA Loan.

We also offer many other loan options for those not eligible for a VA loan, including FHA & other conventional loan options.

Military in Tennessee

Tennessee has a smaller military presence, with only two bases actually located within the state. However, the Arnold Air Force Base and NSA Mid-South Naval Base are two of the most reputable bases of the US Armed Forces. In addition, the state has a strong National Guard, with over 10,000 soldiers serving as full partners with active duty men and women worldwide.

Here is a list of some the places we serve most often with VA loans in Tennessee. Click the name to learn more about each one.

Nashville

Nashville is the most populous city in Tennessee currently, thanks to an explosion of growth in the past decade. Professionals continue to flock there for jobs in tech, healthcare and music. New construction is also booming to accommodate homeowners with options for both homes and condos.

Memphis

Memphis is the second largest city in Tennessee, with just slightly less people than Nashville. The city’s proximity to the Mississippi River and multiple US Highways has provided a strong and stable economy for its residents. Memphis is also well known for its arts and cultural scene, particularly with Blues music.

Knoxville

Knoxville is Tennessee’s third largest city and home to the UT Vols. Though well known for its college and football, Knoxville is also popular for those interested in being near the Smokey Mountains. According to US News, Knoxville residents enjoy a lower overall cost of living as well.

Chattanooga

Chattanooga is in the Southeastern corner of Tennessee. Residents here get all the benefits of a small town feel with big city amenities. The city sits at the base of Lookout Mountain along the Tennessee River, making it one of the state’s most gorgeous areas. It also has a bustling art scene and growing economy that supports entrepreneurs. The city continues to catch the eye of Millennials as an attractive place to live.

Clarksville

Clarksville is a popular choice among veteran and active duty military members because of Fort Campbell. Since the military base lies on the border of Kentucky and Tennessee, most of the acreage is in Clarksville and many families choose to buy homes there. Homes are affordable and the city is quite family friendly.

Murfreesboro

Murfreesboro is another Tennessee city rapidly growing. For years it has attracted those who don’t mind the 40 minute commute to Nashville and would prefer a more affordable, family-friendly community. The city has even secured a place among Time’s Best Places To Live.

Oak Ridge

Oak Ridge sits approximately 25 miles outside of Knoxville in the Eastern part of Tennessee. The city boasts plenty of outdoor natural beauty and is home to significant science and research development. Affordable homes and plenty of amenities keep it appealing for home buyers.

Johnson City

Johnson City is another popular place to live in Tennessee as homeowners can enjoy a nice mix of country and city life. It’s surrounded by mountains, offering plenty of outdoor adventures for those who love nature. It also has low crime, solid school systems, and a local college that keeps the city growing.

Tennessee VA Loan FAQs

Eligibility

VA Loan Eligibility

Many veterans and active duty borrowers chose the VA loan program as it provides qualified home buyers the ability to purchase a home with no down payment. It’s an incredible perk, available only to veterans and active duty military members. This benefit opens the doors of homeownership to those who might otherwise struggle with financing.

The other features of the VA Home Loan include:

No PMI (Private Mortgage Insurance)

Flexible credit and income requirements

Consistently lower rates than other loan products

A VA loan entitlement is a hard-earned benefit and not available to everyone. At 1st United Mortgage, we are here to help you utilize it. Thanks to its unmatched buying power and flexibility, the VA loan program is often the simplest and most powerful path to homeownership for many of our clients: veterans, service members and military families.

What is the VA Loan entitlement?

Veterans, service members and others who qualify have what is called an entitlement, which is essentially a promise from the Department of Veterans Affairs. The Department of Veteran Affairs ensures they will provide a financial guaranty on mortgages issued by approved lenders. However, that also means the the VA doesn’t issue home loans, but simply guarantees a portion of each. That guaranty is important to lenders; it helps borrowers who might otherwise struggle to secure financing for home. The VA entitlement means homebuyers have a financial guaranty directly from the Department of Veterans Affairs.

Am I eligible as a spouse of a deceased veteran?

Some non-military personnel, including both unmarried and remarried spouses are eligible for the VA home loan program. These include:

An unmarried spouse whose veteran died while on active duty or from a disability connected to his or her service

Surviving spouses who obtained a VA loan with the veteran before his or her death can obtain a VA Interest Rate Reduction Refinance Loan, better known as a VA Streamline refinance.

Surviving spouses who remarried upon or after turning age 57 and on or after December 16, 2003, may be eligible for a VA home loan. Surviving spouses who remarried before that date are no longer eligible to participate.

The spouse of an active duty member who is listed as missing in action (MIA) or a prisoner of war (POW) for at least 90 days is eligible for one-time use of the VA home loan benefit.

How can I get my Certificate of Eligibility?

The Certificate of Eligibility, or COE, is a formal VA document that certifies what entitlement, if any, a military member has for a VA home loan. The COE is crucial for the process and verifies a veteran’s eligibility and entitlement to the benefit. Prospective borrowers cannot complete the lending process without a COE. Veterans can contact the VA directly to obtain their Certificate of Eligibility, though it may take a few weeks to receive. At 1st United Mortgage, we use an automated system that takes only moment to produce your Certificate of Eligibility.

Who is eligible for the VA Loan?

The eligibility requirements for veterans and service members, along with members of the Reserves, the National Guard and surviving spouses are as follows:

• You served 181 days during peacetime (Active Duty)

• You served 90 days during war time (Active Duty)

• You served 6 years in the Reserves or National Guard

• You are the spouse of a service member who died in the line of duty or because of a service-connected disability.

Verification of a veteran’s eligibility for a VA loan is through a COE, or Certificate of Eligibility. These can be obtained directly from the VA, which typically takes a few weeks. Another option is to contact a lender, who can obtain your COE far more quickly. At 1st United Home Loans we cab get your Certificate of Eligibility in minutes.

It’s important to remember that not everyone eligible for a VA loan ultimately secures one. Borrowers will still need to satisfy credit and underwriting standards, which are set by both the lender and the VA.

When purchasing a home, does the VA Loan allow for cash back options?

The VA has two major refinance programs. The Cash-Out Refinance program helps homeowners extract cash from their home’s equity while obtaining a lower interest rate.

What is the difference between eligibility and prequalification?

Unfortunately, not all borrowers who meet eligibility guidelines for a VA loan will ultimately secure financing for a home. Credit and underwriting standards set by both the VA and the lender must still be met. Getting prequalified for a loan is a basic step and can even be completed over the phone or online.

This step is valuable for veterans as it provides an idea of their purchasing power while laying the foundation for the credit and underwriting process. The next step is moving toward loan preapproval, and depends largely on credit scores. This is a more formal stage desired by home sellers and real estate agents. At 1st United Mortgage, we help those with scores as low as 560!

How do basic and bonus entitlements work?

Formerly known as Basic Allowance for Quarters, Basic Allowance for Housing is a key asset that can help service members qualify for and afford a VA mortgage. This monthly housing allowance can be counted as income. However, it must be verifiably stable and likely to continue.

This also applies to other military allowances and forms of bonus pay. Lenders want assurance that payments are reliable and consistent. Qualified borrowers can use BAH to cover some or all of their monthly mortgage payment.

How do I restore my entitlement once I pay off my previous VA Loan?

Veterans can seek a full restoration of their entitlement after paying off their VA loan. This often happens once a borrower sells their home and then uses the proceeds of the sale to pay off their original mortgage. At that time, the veteran’s previously used entitlement is no longer tied up in the original home. At this stage, Veterans must fill out a VA form and submit that document to the agency for full restoration.

What is 2nd Tier Entitlement?

Qualified borrowers have two layers of entitlement, which combine to create the VA guaranty. For those borrowers who have experienced foreclosures or other major problems with VA loans, the additional layer of entitlement is beneficial. With the second-tier entitlement, veterans who have defaulted on a VA loan may still purchase again. There’s a minimum loan amount of $144,000 on a second-tier entitlement purchase.

Can I use the VA Loan for a second home or rental properties?

No. The VA Loan can only be used for primary residences that are occupied by the owners of the properties; it may not be used on vacation or rental homes.

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VA Loan Qualification

Who sets the VA Loan guidelines, the VA or my lender?

The VA sets are broad requirements and guidelines for military borrowers. The VA has no income requirements or credit requirements and simply requires that borrowers represent a satisfactory credit risk.

Since VA lenders ultimately issue the loans, they have their own unique requirements, especially regarding credit scores. Prospective borrowers must satisfy both guidelines – those set by the VA and the ones set by agency approved lenders.

If I have bad credit, can I still get a VA Loan?

Every lender has its own minimums for credit scores which means that VA Loans are possible even with low credit scores. At 1st United Mortgage, we want anyone willing to serve our country to have the chance for home ownership. If your score is above 570, we can get you approved.

Can someone else sign on the loan with me?

Yes, veterans and service members may have a co-borrower, but there are certain restrictions. For a VA loan, that co-signor must be either a spouse or another veteran. That means parents, friends and significant others who don’t fall under one of those two headings cannot be a co-borrower on a VA loan.

Married veterans may obtain a VA loan on their own, but if they live in a community property state, their spouse’s active debt and income will be factored into the loan application.

What income can I use to qualify for a VA Loan?

VA-approved lenders require prospective borrowers verify enough steady income to meet their monthly expenses (including a new mortgage payment). Lenders want a minimum of two years of stable employment, and that income comes from the same employer and job type. Sources of verification for income include:
• Base pay & allowances
• Non-military employment
• Retirement income
• Self-Employment
• Commissions
• Rental income
• A spouse’s income
• Alimony/child care

Overtime work, part-time jobs, second jobs and bonuses, must still show the same two-year period of stability. Self-employed veterans or those who make a living in the building trades, doing seasonal work or working mostly on commission have additional paperwork requirements. Tax returns for the previous two years will be essential in verifying income.

How long do I have to wait after bankruptcy to get a VA Loan?

Thankfully, a bankruptcy or foreclosure won’t automatically disqualify you from participating in the VA Home Loan program. More significance is placed on when the event occurred. Veterans will most likely not get VA financing for approximately two years after a bankruptcy or foreclosure, though here are some exceptions where the VA allows military members to participate in the program before that two-year mark.

Remember though that the VA-approved lenders, not the VA, issues the loans. Lenders have more stringent standards above those set by the VA, which means there’s almost no way for a borrower to secure financing for at least two years.

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Rate And Loan Costs

What fees should I expect to pay for my VA Loan?

The VA caps fees that veterans pay in obtaining a VA loan. Typically, VA lenders charge approximately 1 percent for an origination fee, and another percent for administrative and other costs. Sellers can pay up to 6 percent of the VA loan amount in closing costs and concessions. The VA Funding Fee is one charge most VA borrowers can’t escape. The Funding Fee is a mandatory cost that helps keep the home loan program running, and borrowers with service-connected disabilities may receive an exemption from it.

What is the VA Funding Fee, and how do I calculate it?

The VA Funding Fee is a mandatory fee applied to both purchase and refinance loans and helps keep the home loan program running. The fee is a percentage of the loan amount. It also changes depending on several factors: whether it’s a purchase or a refinance, how many VA loans you’ve had in the past, and the type of military service served.

How are rates for VA Loans determined?

Mortgage rates are shaped by a number of things. To start, lenders set their rates based on what’s happening in the bond market. Then, they also look at the greater financial landscape. This is why interest rates change constantly, even multiple times per day. Because of this movement with interest rates, it’s important to talk with your loan officer about when to lock in yours. As with other lending products, military members with excellent credit can secure better interest rates and loan terms than those with less sterling credit. Overall, VA loans have consistently lower rates than conventional loans.

Does my credit score affect my VA Loan rate?

As always, credit scores plays a significant role in your mortgage rate determination. Solid credit scores equal lower rates and better terms overall. In order to qualify for a government-backed loan, the VA’s only requirement is for borrowers to verify they are a satisfactory credit risk.

However, the VA approved lenders have more stringent requirements and will closely review an applicant’s credit score. Now is the time to get a handle on your credit profile, catch up on outstanding debts and be sure you are responsibly using credit. You want to be in the best position possible when initiating the home-buying process.

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VA Loan Guidelines

Can I borrow more than the value of my home with a VA loan?

Veterans can borrow up to the appraised value of the home with a VA purchase loan (plus costs and fees associated with it). Homebuyers who want their home more energy efficient can add up to $6,000 in improvements via an EEM, or Energy Efficient Mortgage.

Through a VA Cash-Out Refinance, we help veterans and military families refinance up to a full 100 percent of their house value. This helps them to pay bills, renovate their home, pay for education or any other additional costs where they need cash.

Can I have more than one VA loan at a time?

A VA entitlement isn’t a one-time benefit and qualified borrowers can use it multiple times. Granted, most veterans will only have a single VA-backed mortgage at any given time. There are unique situations where veterans would have more than one VA loan due to relocation needs, such as deployments and/or employment.

VA loans are strictly for primary residences and cannot be used to purchase investment properties or businesses.

How complicated is VA financing?

At 1st United Mortgage, we’ve worked to become experts in the VA Loan industry to keep process as simple and streamlined as possible for our clients. Veterans and active duty personnel benefit from the less stringent requirements of the VA home loan program though they still have to meet basic financial and credit-related benchmarks. Once the requirements are met, veterans receive a financial guaranty from the VA. That guaranty gives lenders the confidence to issue no-down payment loans with great rates and terms.

When purchasing a home, does the VA Loan allow for cash back options?

The VA has two major refinance programs. With the Cash-Out Refinance program, homeowners can extract cash from their home’s equity (while obtaining a lower interest rate). We can help veterans refinance up to 100% of a property’s appraised value too while most lenders are currently capped at 90 percent.

The process for obtaining a Cash-Out Refinance is similar to the process borrowers go through for a VA purchase loan. Veterans with a conventional or FHA mortgage can refinance into a VA loan using the Cash-Out program.

What is the maximum VA Home Loan?

There is no maximum loan amount on a VA loan, but there is a maximum amount the VA will guaranty without some manner of down payment. That’s what industry people are referring to when they talk about VA loan limits. Right now, qualified borrowers can buy a house worth up to $417,000 with no money down across most of the country. In some high-cost areas, that limit can rise to more than $725,000.

Can I borrow extra money to make home improvements?

VA borrowers can add up to $6,000 to their loan earmarked for energy efficiency improvements, known as an energy efficiency mortgage, or EEM. With an EEM, homeowners can make select upgrades and repairs to the property for maximum energy efficiency. The money spent upfront on energy improvements can ultimately lower heating, cooling and other related energy costs for years to come and those monthly savings can be funneled into dozens of other household necessities or even additional payments to the mortgage principal.

Interested in an EEM? Consult with a lender to arrange for a home energy audit from a professional firm.

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VA Loan Basics

How do I get prequalified and what happens afterward?

Start the application process today by speaking to one of our VA loan specialists!

Our experienced team can prequalify borrowers in matter of minutes over the phone with some basic financial information and take an initial look at your credit score.

After that, you will receive our loan application packet, and begin the path to preapproval. Preapproval is a more involved process. It requires a more detailed look at your finances and your ability to handle a mortgage and its associated costs.

What if I don’t have copies of my discharge paperwork?

It’s easy for paperwork to get lost over time, so borrowers shouldn’t worry if discharge documents or other important pieces of paper aren’t readily accessible. Still, VA lenders need official paperwork in order to process a loan, including the borrower’s Certificate of Eligibility, tax returns and other crucial documents. We can help veterans obtain fresh copies of these with no hassle. Another option? Borrowers can contact the VA and other entities directly to secure the paperwork themselves. Without paperwork, the loan process won’t necessarily derail, but it’s always best to take care of document needs quickly by wokring with a lender.

Can I pay off a VA Loan early?

VA loans have no prepayment policies which means borrowers can pay off loans early without any penalty. This can be a significant benefit for homeowners who wish to lower interest costs over time. By paying an additional $50 or $100 a month toward a premium, years can be shaved off the mortgage, not to mention tens of thousands of dollars saved.

When is the VA Loan not my best option?

For the vast majority of veterans a VA loan is the best option. For active duty service members and military families, the VA loan represents the most flexible and powerful loan program on the market. Qualified borrowers are able to buy a home worth up to $417,000 (and more) with no down payment or out-of-pocket spending.

Sometimes a VA loan isn’t the right fit. For example, veterans with significant cash reserves, i.e those who can cover a 20-percent down payment may find conventional financing makes more sense.

That isn’t the typical financial situation for most military borrowers, which is why VA loans often make the most sense and allow veterans to get get the best use of their money.

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VA Refinancing

Can the VA Loan help me lower my monthly bills?

The VA home loan program offers two major refinance possibilities. One, the Interest Rate Reduction Refinance Loan helps homeowners get into a lower-rate mortgage to reduce their monthly payment. The IRRL, also known as the VA Streamline, has minimal hassle and paperwork involved.

The VA does not require appraisals or credit checks on Streamlines, though some lenders have recently made them mandatory. At 1st United Mortgage, we are still able to process some Streamlines without an appraisal, which is a tremendous benefit given the decline in home values across the country. Homeowners do pay closing costs on a VA Streamline, but these can be easily rolled into the overall loan amount, along with $6,000 in energy efficiency improvements.

Can I refinance my home if I don’t currently have a VA Loan?

Veterans and active duty homeowners who qualify can refinance into a VA loan using the program’s cash-out refinance program. The process for obtaining a Cash-Out Refinance is similar to the process borrowers go through for a VA purchase loan, from the income verification and debt-to-income ratio to a home appraisal. Qualified homeowners with conventional or FHA mortgages do not have to take out cash when they refinance into a VA loan. But they are ineligible for the simpler VA Streamline program.

What types of homes can I buy with a VA Loan?

The vast majority of military buyers use their VA loan to purchase or refinance an existing single-family home. But veterans interested in purchasing a condo or building a home from the ground up can also utilize a VA loan. You can use a VA loan:

To purchase a residence that’s owned and occupied by the veteran.

To refinance an existing VA-guaranteed or direct loan in order to lower the current interest rate.

To refinance in order to take out cash.

To repair, alter or improve a residence owned by a veteran.

To simultaneously purchase and improve a home

To make energy-efficiency improvements in conjunction with a VA purchase or refinance loan.

To purchase up to four one-family residential units in a condo development approved by the VA. One of those four units must be used as the borrower’s primary residence.

To purchase a farm residence to be owned and occupied by the veteran. The property cannot be a working farm or an income-producing property.